Why are so many properties marketed without a price? Should you join the masses and market your property without a price? Is what is best for you as a buyer also best for you as a seller?
“When I’m buying I prefer to see a price on homes I consider.”
“I won’t even enquire about properties unless they are marketed with a price.”
What strategy is most likely to get you your desired result? This post offers food for thought for sellers mulling over the most effective pricing strategy.
What are you aiming for?
The right pricing strategy really depends on your desired outcome so it is important to be clear about what you are trying to
Is price secondary to speed?
Or is getting the best price possible in a reasonable timeframe your objective?
If you are quite happy with a quick sale at the bottom to middle of your ‘market value range’ pricing from the outset may be right for you. But if you are hoping to hit the high end of market value or beyond, increasing your odds of creating some buyer competition needs to be an integral part of your plan.
…and your property.
What is your home actually worth? Forgive me for whipping out another real estate cliche, but this one is true. A property is worth what someone will pay for it.
For a sale to occur we rely on a willing seller and willing buyer. And because each property is different, as is each seller, buyer and the circumstances that influence their decisions, you can easily see a 10% variance between the low and high end of market value.
A real estate agents appraisal, registered valuation or your own research may have given you an approximate idea of what your property is worth but until you’ve actually sold, that number in your head is an educated guess at best.
What factors influence
Buyers other options. How many similar options do buyers have in your location and how does yours stack up amongst them? If buyers options are plentiful in your location you are going to have to work harder and smarter to increase their perception of value in relation to your property. If their options are few and far between you’re in a stronger position, but you will still want to maximise your gain by using a strategy that gets you the best result possible.
Individual buyer circumstances or factors that increase perceived value. Is there something specific about your home that may make it extra desirable to a particular buyer? How long has your buyer been looking? Have they missed out on anything? Are they on a strict deadline (ie. trying to avoid moving twice?) Are they moving from a more expensive area? Perception of value is often skewed by our ‘normal’.
The presence of competition. B
It’s all about competition baby!
Have you ever paid more than you intended for something because you had competition? I certainly have.
And we are far more likely to pay a high price for something we really want if someone else wants it too and we are out to win. Think
Scarcity, real or perceived and competition push price up.
If the best price outcome possible is what you are after you really need to use a pricing strategy that will give you the best odds of creating competition.
When are buyers most likely to compete for your property?
In the first two weeks of your campaign.
You’re the hot new kid on the block and nobody knows how long you’ll be around for. This is your prime time! You will be considered by the build-up of buyers who have been looking for some time (mature buyers) as well as buyers who are new to the market. Mature buyers are the ones you are after as they are the people ready to act.
After your second weekend of Open Homes, it is common to see a fairly drastic drop in numbers of enquiries and viewings. At this stage, many buyers have already viewed your property or advertisement and, either ruled you out or are taking their time to consider you because there doesn’t appear to much of a rush.
Why do buyers prefer to see a price?
As a buyer you like to see a price. Why? Convenience. So you can quickly rule something in or out.
Put on your sellers’ hat for a moment though and think about this. Why would you give buyers who can afford your property but may prefer to spend less a reason (your price) to rule you out without even visiting? Creating competition relies on engaging with as many people as possible who can spend your appraised range and above. You can’t engage with people you don’t speak with or who don’t visit.
“But when I’m house-hunting I won’t even
enquire about properties unless they are marketed with a price.”
Respectfully, if you are adamant about this it is likely because you just aren’t ready to buy.
When you are ready and you spot a home that fits you to a T, you will likely do a bit of web-based research to establish if you have a shot at it and pick up the phone. You aren’t buying the strategy, or the agent or the seller. You’re buying the house.
Early in your campaign: Pricing risks.
Price High: Miss your market
Price high and you may be pricing at a level where only one buyer would see you – on a good day with
Pricing high will cause many of the buyers below your price point to rule you out entirely. If fewer people are interested in your property you may kill your odds of competition, without which, the figure your premium buyer would pay changes. They may wonder why they are the only one wandering through your quiet Open Home and, while fair money will probably still be achievable, it probably won’t be the premium they would have paid had they needed to compete.
Refer to my pyramid illustration above.
“But I can always start high and then reduce my price if I don’t gain any traction.”
You can but you will never recapture that initial level of interest. Once it’s gone it’s gone and this is a key reason for getting your strategy right in all respects the first time around.
As mentioned earlier, properties that are new to the market tend to attract the most attention in the first two weeks of their campaign. More interest/demand = greater odds of creating competition.
Price too high initially and you kill your odds of competition in the period of time where it is most likely to occur and scare away buyers who may or may not choose to revisit when you adjust your pricing. Buyers don’t always remember why they ruled you out, only that they did.
Most importantly, you may lose the buyer who, early on, would have paid you a premium had they needed to compete but whose level of interest now wanes as your days on the market increase.
In real estate, more time on the market usually equals less money. Unless you are selling in a rising market but then everything else has risen in value too so, if you are reinvesting your money into property, your rise in value may not improve your position.
Price Low: Underselling.
Underselling is not just taking less than market value. It can also be accepting fair market value when there is still, unknown to you, money on the table.
It doesn’t only happen to the foolhardy or desperate but to ordinary, otherwise intelligent people whose only mistake is choosing the wrong strategy or falling victim to poor advice.
If you price too low from the outset you may sell virtually immediately for a price you are happy with. But you might be less happy if you knew what you missed out on. Even if you have a multiple offer situation and a buyer offers over list price they are still unlikely to go all that far above the bar set by your price.
A note on strategy.
When marketing without a price I find that it is most effective to do this via a strategy with some structure around it such as Set Date of Sale/Deadline Sale, Tender or Auction.
Having a deadline is helpful as it encourages buyers to act and, if you remain unsold after the deadline passes, brings the ‘no price marketing’ portion of your campaign to a natural conclusion enabling you to move on to Plan B – Pricing.
Important: Withholding price indefinitely can give buyers the impression that you want too much for your property and are too scared to give them a figure. If you have been on the market for 4-5 weeks, consider pricing to give the market a target to hit.
When pricing, aim for accuracy rather than a price that gives your buyer heaps of room to knock you back. If buyers see value they do not need to knock you back much if at all. Analysing whether or not you offer value for money is easy – just check out your competition.
Remember, at any stage in your campaign, it is all about making choices that give you the greatest likelihood of creating buyer engagement and competition.
Good luck with your sale!